And once inflation gets into the supply chain in this way, cost-of-living rises become almost inevitable. Consider, then, that even in July, when CPI inflation dipped, the ONS fine-print revealed input inflation of no less than 10pc. In August, such supply-chain inflation was even higher, as firms faced input prices 11pc higher than in August 2020.
As inflation rises, if wages don’t keep up – and for many they won’t – then workers and households lose out. Even more fundamentally, rising inflation spooks firms and investors, so they hoard rather than deploy capital, which means growth and jobs suffer.
In July, Economic Agenda revealed that the House of Lords Economic Affairs Committee – which includes a raft of distinguished economists, including former Bank of England governor Mervyn King – was about to release a hard-hitting report into quantitative easing.
Peers took evidence from heavyweight policymakers from across the world – including the current Bank Governor Andrew Bailey. The report – which argued that ongoing QE money-creation “poses inflationary dangers”, risks a “loss of credibility” and has become “an addiction” – amounted to the UK’s first significant independent investigation into QE, a policy that has dominated our economy and financial markets over the last decade.
The Bank and Treasury last week replied to the committee’s report, as they must. Their respective responses, which I’ve seen, were – to be generous – somewhat cursory.
That’s caused concern among key committee members. I suspect Governor Bailey hasn’t yet seen the back of this Lords report, and the committee’s broader line of inquiry, which has clearly got his goat.